```markdown PART I – Financial Information [ITEM 1. Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) This section presents STRATA Skin Sciences' unaudited condensed consolidated financial statements, including balance sheets, operations, equity, and cash flows, with detailed notes for Q1 2021 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $45,854 thousand, liabilities increased, and stockholders' equity declined to $24,136 thousand by March 31, 2021 Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | March 31, 2021 | December 31, 2020 | | :-------------------- | :------------- | :---------------- | | Total Assets | $45,854 | $46,778 | | Total Liabilities | $21,718 | $20,886 | | Total Stockholders' Equity | $24,136 | $25,892 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a net loss of $2,418 thousand for Q1 2021, a significant increase from the prior year, driven by lower revenues and higher operating expenses Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | | :-------------------- | :---------------------------- | :---------------------------- | | Revenues, net | $5,827 | $6,730 | | Cost of revenues | $2,114 | $2,331 | | Gross profit | $3,713 | $4,399 | | Operating expenses | $6,105 | $5,347 | | Loss from operations | $(2,392) | $(948) | | Net loss | $(2,418) | $(1,035) | | Basic Loss per common share | $(0.07) | $(0.03) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity decreased to $24,136 thousand by March 31, 2021, primarily due to the net loss, partially offset by stock-based compensation Condensed Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Metric (in thousands) | January 1, 2021 | March 31, 2021 | | :-------------------- | :-------------- | :------------- | | Total Stockholders' Equity | $25,892 | $24,136 | | Stock-based compensation | - | $662 | | Net loss | - | $(2,418) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly decreased to $153 thousand in Q1 2021, while cash used in investing activities increased to $740 thousand Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | | :-------------------- | :---------------------------- | :---------------------------- | | Net cash provided by operating activities | $153 | $598 | | Net cash used in investing activities | $(740) | $(596) | | Net (decrease) increase in cash and restricted cash | $(587) | $2 | | Cash, cash equivalents and restricted cash, end of period | $17,525 | $15,631 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures for the unaudited financial statements, covering business, accounting policies, liquidity, revenue, and COVID-19 impacts [Note 1 The Company: Background and COVID-19 Impact](index=8&type=section&id=Note%201%20The%20Company%3A%20Background%20and%20COVID-19%20Impact) STRATA Skin Sciences, a medical technology company, develops XTRAC® and VTRAC® systems; COVID-19 negatively impacted operations, leading to mitigation strategies - **STRATA Skin Sciences** develops, commercializes, and markets innovative dermatologic products, primarily the **XTRAC® excimer laser** and **VTRAC® lamp systems** for psoriasis and vitiligo[19](index=19&type=chunk)[93](index=93&type=chunk) - As of March 31, 2021, there were **837 XTRAC systems** placed in US dermatologists' offices and 34 internationally under a **recurring revenue model**[20](index=20&type=chunk)[94](index=94&type=chunk) - The company expanded international distribution with agreements in Japan (September 2020) and China (February 2021) for direct capital sales and **recurring revenue**[21](index=21&type=chunk)[95](index=95&type=chunk)[97](index=97&type=chunk) - The **COVID-19 pandemic** negatively impacted the company's **recurring revenue model**, **financial position**, and **cash flow** due to the elective nature of procedures, physician office closures, and supply chain disruptions[23](index=23&type=chunk)[24](index=24&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) - Mitigation efforts included **business continuity plans**, **employee safety measures**, **direct-to-consumer advertising** to restart partner businesses, **employee furloughs**, **reduced discretionary spending**, and **delayed vendor payments** (approx. **$785 thousand** as of March 31, 2021)[24](index=24&type=chunk)[25](index=25&type=chunk)[101](index=101&type=chunk) [Note 1 Basis of Presentation & Significant Accounting Policies](index=9&type=section&id=Note%201%20Basis%20of%20Presentation%20%26%20Significant%20Accounting%20Policies) Unaudited financial statements are prepared under SEC rules, consolidating the Company and its inactive Indian subsidiary, with no material accounting policy changes in Q1 2021 - The financial statements are unaudited, prepared under **SEC interim reporting rules**, and consolidate the Company and its **inactive Indian subsidiary**[26](index=26&type=chunk)[27](index=27&type=chunk) - No material changes to **significant accounting policies** occurred in Q1 2021. **Management's estimates**, including those for **revenue recognition**, **goodwill impairment**, **asset useful lives**, **equity-based awards**, **deferred tax assets**, **inventory reserves**, and **sales/use tax accruals**, are subject to the unknown full impact of **COVID-19**[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) [Note 1 Fair Value Measurements](index=10&type=section&id=Note%201%20Fair%20Value%20Measurements) Fair value measurements adhere to ASC Topic 820, using a three-tier hierarchy, with most monetary assets/liabilities approximating fair value - **Fair value measurements** adhere to **ASC Topic 820**, utilizing a **three-tier hierarchy**: **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than quoted prices), and **Level 3** (unobservable inputs requiring significant judgment)[32](index=32&type=chunk)[33](index=33&type=chunk)[37](index=37&type=chunk) - The carrying values of **cash**, **cash equivalents**, **restricted cash**, **short-term monetary assets/liabilities**, **note payable**, and **long-term debt** are estimated to approximate their **fair values**[34](index=34&type=chunk) [Note 1 Earnings Per Share](index=10&type=section&id=Note%201%20Earnings%20Per%20Share) Basic and diluted loss per common share for Q1 2021 was $(0.07), with all potentially dilutive securities being anti-dilutive Note 1 Earnings Per Share (in thousands) | Metric | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | | :----- | :---------------------------- | :---------------------------- | | Basic and Diluted loss per common share | $(0.07) | $(0.03) | | Weighted average common shares outstanding | 33,802,129 | 33,164,321 | - **Potentially dilutive securities** (**warrants**, **restricted stock units**, **stock options**) were excluded from **diluted EPS calculations** as their inclusion would have been **anti-dilutive** for both periods[38](index=38&type=chunk)[39](index=39&type=chunk) [Note 1 Accounting Pronouncements](index=11&type=section&id=Note%201%20Accounting%20Pronouncements) ASU No. 2019-12 had no material effect; ASU 2020-04 and 2020-06 are not expected to materially impact current financial statements - Adoption of **ASU No. 2019-12 (Income Taxes)** on January 1, 2021, had no material effect[40](index=40&type=chunk) - **ASU 2020-04 (Reference Rate Reform)** is not expected to have a material effect as the company has no **hedging activities**[42](index=42&type=chunk) - **ASU 2020-06 (Accounting for Convertible Instruments and Contracts in an Entity's own Equity)** is not expected to have a material effect currently, but could in the future if the company engages in covered contracts[43](index=43&type=chunk) [Note 2 Liquidity](index=12&type=section&id=Note%202%20Liquidity) Despite recurring losses and COVID-19 impacts, management expects sufficient liquidity for 12 months, though future financing may be affected by the pandemic - The company has historically faced **recurring losses** and **negative impacts from COVID-19**[44](index=44&type=chunk) - Management anticipates **sufficient liquidity** for the next 12 months, supported by cash, **expected revenues**, and **PPP/EIDL loan proceeds**[44](index=44&type=chunk) - The ongoing **COVID-19 pandemic** could negatively impact the company's ability to **access financing on favorable terms**[44](index=44&type=chunk) [Note 3 Revenue Recognition](index=12&type=section&id=Note%203%20Revenue%20Recognition) Revenue from recurring procedures is recognized based on usage or ratably, while equipment sales are recognized upon control transfer, with $1,769 thousand in deferred revenues - **Dermatology Recurring Procedures** revenue is recognized on a **per-procedure basis** or as a **fixed fee over a period**, treated as **operating leases under ASC 842**[45](index=45&type=chunk)[46](index=46&type=chunk) - **Dermatology Procedures Equipment** revenue is recognized when **control transfers to the customer**, usually upon shipment (**FOB shipping point**)[49](index=49&type=chunk) - **Deferred revenues (contract liabilities)** were **$1,769 thousand** as of March 31, 2021, expected to be recognized over the **remaining usage period**[51](index=51&type=chunk)[114](index=114&type=chunk) Note 3 Revenue Recognition (in thousands) | Revenue Segment (in thousands) | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | | :----------------------------- | :---------------------------- | :---------------------------- | | Domestic Recurring Procedures | $4,426 | $5,597 | | Foreign Recurring Procedures | $253 | $104 | | Domestic Equipment Sales | $258 | $315 | | Foreign Equipment Sales | $890 | $714 | | Total Revenues | $5,827 | $6,730 | [Note 4 Inventories](index=14&type=section&id=Note%204%20Inventories) Total inventories decreased to $3,312 thousand by March 31, 2021, primarily due to reductions in raw materials and work-in-process Note 4 Inventories (in thousands) | Inventory Type (in thousands) | March 31, 2021 | December 31, 2020 | | :---------------------------- | :------------- | :---------------- | | Raw materials and work-in-process | $2,751 | $2,949 | | Finished goods | $561 | $495 | | Total inventories | $3,312 | $3,444 | [Note 5 Property and Equipment, net](index=15&type=section&id=Note%205.%20Property%20and%20Equipment%2C%20net) Net property and equipment increased to $5,788 thousand, mainly due to lasers placed-in-service, while depreciation expense decreased to $481 thousand in Q1 2021 Note 5 Property and Equipment, net (in thousands) | Asset Type (in thousands) | March 31, 2021 | December 31, 2020 | | :------------------------ | :------------- | :---------------- | | Lasers placed-in-service | $23,596 | $22,942 | | Total property and equipment, net | $5,788 | $5,529 | - **Depreciation and related amortization expense** decreased to **$481 thousand** for Q1 2021 from **$586 thousand** for Q1 2020[55](index=55&type=chunk) [Note 6 Intangible Assets, net](index=15&type=section&id=Note%206.%20Intangible%20Assets%2C%20net) Net definite-lived intangible assets decreased to $5,993 thousand, with amortization expense of $352 thousand in Q1 2021 and no impairment charges Note 6 Intangible Assets, net (in thousands) | Intangible Asset (in thousands) | Balance (Gross) | Accumulated Amortization | Net (March 31, 2021) | | :------------------------------ | :-------------- | :----------------------- | :------------------- | | Core technology | $5,700 | $(3,278) | $2,422 | | Product technology | $2,000 | $(2,000) | $0 | | Customer relationships | $6,900 | $(3,967) | $2,933 | | Tradenames | $1,500 | $(862) | $638 | | Total intangible assets, net | $16,100 | $(10,107) | $5,993 | - **Amortization expense** for **definite-lived intangible assets** was **$352 thousand** for Q1 2021, compared to **$452 thousand** for Q1 2020[56](index=56&type=chunk) - No **impairment charges** were recognized for **definite-lived intangible assets** during the three months ended March 31, 2021[57](index=57&type=chunk) [Note 7 Other Accrued Liabilities](index=16&type=section&id=Note%207.%20Other%20Accrued%20Liabilities) Total other accrued liabilities increased to $5,286 thousand, mainly due to accrued compensation, with ongoing appeals for state sales and use tax assessments Note 7 Other Accrued Liabilities (in thousands) | Accrued Liability (in thousands) | March 31, 2021 | December 31, 2020 | | :------------------------------- | :------------- | :---------------- | | Accrued compensation | $1,491 | $891 | | Accrued state sales, use and other taxes | $3,150 | $3,105 | | Total other accrued liabilities | $5,286 | $4,690 | - The company is appealing **state sales and use tax assessments** totaling **$1,484 thousand** (one state) and **$720 thousand** plus interest (another state), believing its **recurring revenue model is exempt** or has other defenses[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) Note 7 Other Accrued Liabilities (in thousands) | Warranty Accrual (in thousands) | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | | :------------------------------ | :---------------------------- | :---------------------------- | | Accrual at beginning of period | $113 | $232 | | Additions charged to expense | $4 | $3 | | Expiring warranties/claims satisfied | $(32) | $(54) | | Total | $85 | $181 | [Note 8 Note Payable](index=17&type=section&id=Note%208.%20Note%20Payable) A $7,275 thousand note payable was renewed, secured by a time deposit, maturing December 30, 2021, with a 1.40% fixed interest rate - A **$7,275 thousand note payable** was renewed on December 30, 2020, maturing on December 30, 2021, with a fixed interest rate of **1.40%**[67](index=67&type=chunk) - The note is secured by a **pledged time deposit** of **$7,275 thousand**, recorded as **restricted cash**[67](index=67&type=chunk) [Note 9 Long-term Debt](index=17&type=section&id=Note%209.%20Long-term%20Debt) The company holds a $2.0 million PPP loan with a pending forgiveness application and a $500 thousand EIDL loan with deferred payments - The company has a **$2,028 thousand PPP loan** (1% interest, 5-year maturity), with a **100% forgiveness application** submitted in December 2020, pending **SBA approval**[68](index=68&type=chunk)[69](index=69&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk)[132](index=132&type=chunk) - The company also has a **$500 thousand EIDL loan** (3.75% interest, 30-year repayment), for which **payments were deferred** by an additional 12 months in March 2021[70](index=70&type=chunk)[108](index=108&type=chunk)[133](index=133&type=chunk) [Note 10 Warrants](index=18&type=section&id=Note%2010.%20Warrants) All 19,812 common stock warrants expired on January 29, 2021, resulting in no outstanding warrants as of March 31, 2021 - All **19,812 common stock warrants** outstanding at December 31, 2020, expired on January 29, 2021[71](index=71&type=chunk) - There were **no outstanding common stock warrants** as of March 31, 2021[71](index=71&type=chunk) [Note 11 Stock-based Compensation](index=18&type=section&id=Note%2011.%20Stock-based%20Compensation) Stock-based compensation expense increased to $662 thousand in Q1 2021, with $2,999 thousand unrecognized, and options granted to the incoming CEO Note 11 Stock-based Compensation (in thousands) | Metric (in thousands) | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | | :-------------------- | :---------------------------- | :---------------------------- | | Stock-based compensation expense | $662 | $430 | - As of March 31, 2021, **$2,999 thousand** in **unrecognized compensation expense** remains, to be recognized over a **weighted average period** of **1.38 years**[73](index=73&type=chunk) - **Vesting of unvested options** for the **departing CEO** was **accelerated**, incurring an additional **$173 thousand** compensation expense[74](index=74&type=chunk) - An option to purchase **1,632,590 shares** was granted to the **incoming CEO** on March 1, 2021, with a **strike price** of **$1.73** and an **aggregate fair value** of **$2,103 thousand**[75](index=75&type=chunk) [Note 12 Income Taxes](index=18&type=section&id=Note%2012.%20Income%20Taxes) Income tax expense decreased to $4 thousand in Q1 2021, primarily due to deferred tax liability changes related to goodwill, with NOLs limited by Section 382 Note 12 Income Taxes (in thousands) | Metric (in thousands) | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | | :-------------------- | :---------------------------- | :---------------------------- | | Income tax expense | $4 | $88 | - **Income tax expense** was primarily driven by changes in **deferred tax liability related to goodwill**, an **amortizing asset for tax purposes**[77](index=77&type=chunk) - The **CARES Act** is not expected to significantly impact the company's **financial position**, results, or **cash flows**[78](index=78&type=chunk) - **Section 382 of the Internal Revenue Code** limits the annual utilization of **net operating losses** due to past **ownership changes**[79](index=79&type=chunk) [Note 13 Business Segments](index=19&type=section&id=Note%2013.%20Business%20Segments) The company operates in Dermatology Recurring Procedures and Equipment segments, with total revenues decreasing 13.4% and gross profit percentage declining to 63.7% in Q1 2021 - The company operates two segments: **Dermatology Recurring Procedures** (revenue from equipment usage) and **Dermatology Procedures Equipment** (revenue from equipment sales)[80](index=80&type=chunk) Note 13 Business Segments (in thousands) | Segment (in thousands) | Q1 2021 Revenue | Q1 2021 Gross Profit | Q1 2021 Gross Profit % | Q1 2020 Revenue | Q1 2020 Gross Profit | Q1 2020 Gross Profit % | | :--------------------- | :-------------- | :------------------- | :--------------------- | :-------------- | :------------------- | :--------------------- | | Dermatology Recurring Procedures | $4,679 | $3,178 | 67.9% | $5,701 | $3,899 | 68.4% | | Dermatology Procedures Equipment | $1,148 | $535 | 46.6% | $1,029 | $500 | 48.6% | | Total | $5,827 | $3,713 | 63.7% | $6,730 | $4,399 | 65.4% | - Overall **gross profit** decreased to **$3,713 thousand** (**63.7%** of revenue) in Q1 2021 from **$4,399 thousand** (**65.4%** of revenue) in Q1 2020, primarily due to **lower sales** and **unfavorable deferred revenue impact**[119](index=119&type=chunk)[121](index=121&type=chunk) [Note 14 Significant Customer Concentration](index=20&type=section&id=Note%2014.%20Significant%20Customer%20Concentration) One distributor accounted for 11.7% of Q1 2021 revenues, and one customer represented 22.3% of total accounts receivable - One **distributor** accounted for **11.7% of total revenues** for the three months ended March 31, 2021[85](index=85&type=chunk) - One customer represented **22.3% of total accounts receivable** as of March 31, 2021[85](index=85&type=chunk) [Note 15 Commitments: Leases](index=20&type=section&id=Note%2015.%20Commitments%3A%20Leases) The company leases facilities and equipment under non-cancellable operating leases, with $116 thousand in Q1 2021 costs and $1,148 thousand in total remaining payments - The company leases facilities and IT/office equipment under **non-cancellable operating leases** with **remaining terms** of **1 to 4 years**[86](index=86&type=chunk) Note 15 Commitments: Leases (in thousands) | Year Ending December 31, | Amount (in thousands) | | :----------------------- | :-------------------- | | Remaining 2021 | $349 | | 2022 | $371 | | 2023 | $242 | | 2024 | $186 | | Total remaining lease payments | $1,148 | | Less: imputed interest | $(160) | | Total lease liabilities | $988 | - **Operating lease costs** were **$116 thousand** for Q1 2021, compared to **$112 thousand** for Q1 2020[87](index=87&type=chunk) [Note 15 Commitments: Contingencies](index=21&type=section&id=Note%2015.%20Commitments%3A%20Contingencies) The company is routinely involved in legal actions and regulatory inquiries, including contract and employment matters, with potential for substantial monetary damages - The company is routinely involved in **legal actions and proceedings**, including **contract claims** and **employment-related matters**, with potential for **substantial monetary damages**[89](index=89&type=chunk) - The company is subject to **regulatory and governmental examinations**, **inquiries**, and **investigations**[89](index=89&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2021 financial condition and results, highlighting COVID-19 impacts, mitigation strategies, declining revenues, increased net loss, and liquidity position [Introduction, Outlook and Overview of Business Operations](index=22&type=section&id=Introduction%2C%20Outlook%20and%20Overview%20of%20Business%20Operations) STRATA Skin Sciences, a medical technology company, focuses on dermatological treatments with XTRAC® and VTRAC® systems, expanding internationally, and beta-testing "Home by XTRAC™" amid COVID-19 impacts - **STRATA Skin Sciences** is a medical technology company focused on dermatological treatments using **XTRAC® excimer laser** and **VTRAC® lamp systems**[93](index=93&type=chunk) - As of March 31, 2021, **837 XTRAC systems** were placed in US dermatologists' offices under a **recurring revenue model**, an increase from 832 at December 31, 2020[94](index=94&type=chunk) - The company introduced **"Home by XTRAC™"** for at-home, insurance-reimbursed treatments, currently in beta testing[96](index=96&type=chunk) - The **COVID-19 pandemic** has negatively impacted the company's Q1 2021 results and is expected to continue affecting revenue, earnings, and **cash flows** due to disruptions in **elective procedures**, **supply chains**, and physician practice operations[99](index=99&type=chunk)[100](index=100&type=chunk)[103](index=103&type=chunk) [Key Technology](index=24&type=section&id=Key%20Technology) Key technologies include the XTRAC® Excimer Laser (FDA-cleared 2000) and VTRAC® Lamp (FDA-cleared 2005), with recent XTRAC developments like MMD tip and S3® - **XTRAC® Excimer Laser** (FDA-cleared 2000) delivers targeted **308nm UVB light** for psoriasis and vitiligo, with coverage by most major insurance companies[109](index=109&type=chunk) - Recent **XTRAC** developments include the **Multi Micro Dose (MMD) tip** (2018), the **S3® next-generation XTRAC** (2018), and the **XTRAC Momentum Excimer Laser Platform** (2020)[109](index=109&type=chunk) - **VTRAC® Lamp** (FDA-cleared 2005) provides targeted therapeutic efficacy with a simpler design[109](index=109&type=chunk) [Recent Developments (PPP and EIDL Loans)](index=24&type=section&id=Recent%20Developments) The company secured a $2.0 million PPP loan with a pending forgiveness application and a $500 thousand EIDL loan with deferred payments - The company received a **$2.0 million PPP loan** in April 2020, with a **100% forgiveness application** submitted in December 2020, pending **SBA approval**; the loan's maturity was extended to five years[106](index=106&type=chunk)[107](index=107&type=chunk) - A **$500 thousand EIDL loan** was secured in May 2020, with **payments were deferred** by an additional 12 months in March 2021[108](index=108&type=chunk) [Critical Accounting Policies and Estimates](index=25&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) No changes to critical accounting policies occurred in Q1 2021; these policies are regularly reviewed with the Audit Committee and detailed in the 2020 Form 10-K - No changes to **critical accounting policies** occurred during the three months ended March 31, 2021[110](index=110&type=chunk) - **Critical accounting policies** and estimates are regularly discussed with the **Audit Committee** and detailed in the **2020 Form 10-K**[110](index=110&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Total revenues decreased 13.4% to $5,827 thousand in Q1 2021, with gross profit declining to $3,713 thousand and increased operating expenses leading to a higher net loss Results of Operations (in thousands) | Metric (in thousands) | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | | :-------------------- | :---------------------------- | :---------------------------- | | Total Revenues | $5,827 | $6,730 | | Total Cost of Revenues | $2,114 | $2,331 | | Gross Profit | $3,713 | $4,399 | | Gross Profit % | 63.7% | 65.4% | [Dermatology Recurring Procedures Revenue](index=25&type=section&id=Dermatology%20Recurring%20Procedures) Revenue from Dermatology Recurring Procedures decreased 17.9% to $4,679 thousand in Q1 2021 due to COVID-19 and lower deferred revenue, with plans for increased advertising Dermatology Recurring Procedures Revenue (in thousands) | Metric | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | | :----- | :---------------------------- | :---------------------------- | | Revenue (in thousands) | $4,679 | $5,701 | | Estimated Treatments | 67,000 | 82,000 | - The decrease in **recurring revenue** was attributed to the ongoing **COVID-19 pandemic** and the unfavorable impact of lower deferred revenue from Q4 2020[112](index=112&type=chunk)[114](index=114&type=chunk) - The company plans to increase **direct-to-patient advertising** and **marketing spend** in 2021 to drive **patient traffic** to partner clinics and increase **recurring revenue**, anticipating a **3-9 month lag** for results[113](index=113&type=chunk) [Dermatology Procedures Equipment Revenue](index=26&type=section&id=Dermatology%20Procedures%20Equipment) Dermatology Procedures Equipment revenue increased 11.6% to $1,148 thousand in Q1 2021, but future revenues may be negatively impacted by the international recurring revenue model transition Dermatology Procedures Equipment Revenue (in thousands) | Metric | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | | :----- | :---------------------------- | :---------------------------- | | Revenue (in thousands) | $1,148 | $1,029 | | International Systems Sold | 2 (XTRAC) | 3 (VTRAC) | | Domestic Systems Sold | 0 | 1 (XTRAC) | - The transition to a **recurring revenue model** with **international distributors** is expected to negatively impact **equipment revenues**[115](index=115&type=chunk)[117](index=117&type=chunk) [Operating Expenses](index=27&type=section&id=Operating%20Expenses) Total operating expenses increased to $6,105 thousand in Q1 2021, driven by higher engineering and significantly increased general and administrative costs due to CEO transition Operating Expenses (in thousands) | Expense (in thousands) | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | | :--------------------- | :---------------------------- | :---------------------------- | | Engineering and product development | $384 | $292 | | Selling and marketing | $2,932 | $2,953 | | General and administrative | $2,789 | $2,102 | | Total Operating Expenses | $6,105 | $5,347 | - **General and administrative expenses** increased significantly due to **CEO transition costs** (severance, recruiting, accelerated stock compensation)[126](index=126&type=chunk) [Interest (Expense) Income, Net](index=27&type=section&id=Interest%20(Expense)%20Income%2C%20Net) The company reported net interest expense of $22 thousand in Q1 2021, a shift from net interest income in Q1 2020, primarily due to lower interest rates Interest (Expense) Income, Net (in thousands) | Metric (in thousands) | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | | :-------------------- | :---------------------------- | :---------------------------- | | Interest (expense) income, net | $(22) | $1 | [Income Taxes](index=27&type=section&id=Income%20Taxes) Income tax expense decreased to $4 thousand in Q1 2021 from $88 thousand in Q1 2020, primarily due to changes in deferred tax liability related to goodwill Income Taxes (in thousands) | Metric (in thousands) | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | | :-------------------- | :---------------------------- | :---------------------------- | | Income tax expense | $4 | $88 | [Non-GAAP Adjusted EBITDA](index=27&type=section&id=Non-GAAP%20adjusted%20EBITDA) Non-GAAP adjusted EBITDA for Q1 2021 was a loss of $811 thousand, a significant decrease from a positive $599 thousand in Q1 2020, used to show core operating results Non-GAAP Adjusted EBITDA (in thousands) | Metric (in thousands) | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | | :-------------------- | :---------------------------- | :---------------------------- | | Net Loss | $(2,418) | $(1,035) | | Non-GAAP EBITDA | $(1,473) | $169 | | Non-GAAP adjusted EBITDA | $(811) | $599 | - **Non-GAAP adjusted EBITDA** is presented to isolate certain expenses, gains, and losses not indicative of **core operating results** and to enhance comparability[130](index=130&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) Working capital decreased to $3,997 thousand by March 31, 2021; operating cash flow declined, while investing cash flow increased, with future financing risks due to COVID-19 Liquidity and Capital Resources (in thousands) | Metric (in thousands) | March 31, 2021 | December 31, 2020 | | :-------------------- | :------------- | :---------------- | | Working Capital | $3,997 | $5,993 | | Cash, cash equivalents and restricted cash | $17,525 | $18,112 | - Net cash provided by **operating activities** decreased to **$153 thousand** in Q1 2021 from **$598 thousand** in Q1 2020, mainly due to a higher net loss[135](index=135&type=chunk) - Net cash used in **investing activities** increased to **$740 thousand** in Q1 2021 from **$596 thousand** in Q1 2020, driven by **lasers placed-in-service** and **property/equipment purchases**[136](index=136&type=chunk) - Management believes current cash, anticipated revenues, and **PPP/EIDL loan proceeds** will be sufficient for the next 12 months, but **COVID-19** poses risks to future financing[134](index=134&type=chunk) [Commitments and Contingencies](index=29&type=section&id=Commitments%20and%20Contingencies) No new significant commitments or contingencies were reported beyond those detailed in the 2020 annual financial statements - No new significant commitments or contingencies were reported beyond those in the 2020 annual financial statements[138](index=138&type=chunk) [Off-Balance Sheet Arrangements](index=29&type=section&id=Off-Balance%20Sheet%20Arrangements) The company had no off-balance sheet arrangements as of March 31, 2021 - The company had no **off-balance sheet arrangements** as of March 31, 2021[139](index=139&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosure about Market Risk](index=29&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) This section is marked as "Not applicable", indicating no material quantitative or qualitative disclosures regarding market risk are provided for the period - This section is marked as **"Not applicable"**[140](index=140&type=chunk) [ITEM 4. Controls and Procedures](index=29&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, with the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2021, concluding they were effective at a reasonable assurance level, with no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=29&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2021 - Management, with CEO and CFO participation, concluded that **disclosure controls and procedures** were **effective at the reasonable assurance level** as of March 31, 2021[141](index=141&type=chunk) [Limitations on the Effectiveness of Controls](index=30&type=section&id=Limitations%20on%20the%20Effectiveness%20of%20Controls) Control systems provide reasonable, not absolute, assurance that objectives are met, acknowledging inherent limitations that prevent absolute detection of all control issues - **Control systems** provide **reasonable, not absolute, assurance** due to **inherent limitations**[142](index=142&type=chunk) [Changes in Internal Control over Financial Reporting](index=30&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the most recent fiscal quarter - No **material changes in internal control over financial reporting** occurred during the most recent fiscal quarter[143](index=143&type=chunk) PART II - Other Information [ITEM 1. Legal Proceedings](index=30&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is routinely involved in legal actions and proceedings, including contract claims and employment-related matters, some of which may be material - The company is routinely a party to **legal actions and proceedings**, including **contract claims** and **employment-related matters**, some of which may be material[145](index=145&type=chunk) [ITEM 1A. Risk Factors](index=30&type=section&id=ITEM%201A.%20Risk%20Factors) Risk factors are detailed in Item 1A of the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 - **Risk factors** are detailed in Item 1A of the company's **Annual Report on Form 10-K** for the fiscal year ended December 31, 2020[146](index=146&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) None to report - **None to report**[147](index=147&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=30&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) None to report - **None to report**[147](index=147&type=chunk) [ITEM 4. Mine Safety Disclosures](index=30&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) None to report - **None to report**[148](index=148&type=chunk) [ITEM 5. Other Information](index=30&type=section&id=ITEM%205.%20Other%20Information) None to report - **None to report**[149](index=149&type=chunk) [ITEM 6. Exhibits](index=31&type=section&id=ITEM%206.%20Exhibits) The section lists various exhibits, including corporate governance documents (e.g., Certificate of Incorporation, Bylaws), employment-related agreements (e.g., CEO separation and employment agreements, stock option agreement), and certifications (e.g., Rule 13a-14(a) Certificates, Section 1350 Certifications) - The section lists various exhibits, including **corporate governance documents** (e.g., Certificate of Incorporation, Bylaws), **employment-related agreements** (e.g., CEO separation and employment agreements, stock option agreement), and **certifications** (e.g., Rule 13a-14(a) Certificates, Section 1350 Certifications)[152](index=152&type=chunk) [Signatures](index=32&type=section&id=Signatures) The report is signed by Robert J. Moccia, President & Chief Executive Officer, and Matthew C. Hill, Chief Financial Officer - The report is signed by **Robert J. Moccia**, **President & Chief Executive Officer**, and **Matthew C. Hill**, **Chief Financial Officer**[156](index=156&type=chunk) ```

Start Time: 16:30 January 1, 0000 5:08 PM ET STRATA Skin Sciences, Inc. (NASDAQ:SSKN) Q1 2021 Earnings Conference Call May 12, 2021, 16:30 PM ET Company Participants Robert Moccia - CEO Matthew Hill - CFO Leigh Salvo - IR Conference Call Participants Joseph Pantginis - H.C. Wainwright Jeffrey Cohen - Ladenburg Thalmann Suraj Kalia - Oppenheimer Operator Greetings, and welcome to STRATA Skin Sciences First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A ques ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to _____________ Commission file number: 0-11635 STRATA SKIN SCIENCES, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 13-3986004 (I.R.S. Employer Identification No.) 5 Walnut Grove Drive, Suite 1 ...

STRATA Skin Sciences, Inc. (NASDAQ:SSKN) Q4 2020 Earnings Conference Call March 24, 2021 4:30 PM ET Company Participants Leigh Salvo - IR Robert Moccia - President, CEO & Director Matthew Hill - VP & CFO Conference Call Participants Jeffrey Cohen - Ladenburg Thalmann & Co. Suraj Kalia - Oppenheimer Operator Greetings, and welcome to STRATA Skin Sciences Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions]. I will now turn the conference over to your host, Leigh Salvo. You may begin. Leigh S ...

STRATA Skin Sciences, Inc. (NASDAQ:SSKN) Q3 2020 Results Earnings Conference Call November 10, 2020 8:30 AM ET Company Participants Leigh Salvo - Investor Relations Dolev Rafaeli - President and Chief Executive Officer Matt Hill - Chief Financial Officer Conference Call Participants Jeffrey Cohen - Ladenburg Thalmann Suraj Kalia - Oppenheimer & Company Operator Greetings, and welcome to STRATA Skin SciencesÂ' Third Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, this conference ...

| --- | --- | --- | --- | --- | |-------|---------------------------------------|---------------------------|-------|-------| | | | | | | | | | | | | | | | | | | | | | S e p t e m b e r 2 0 2 0 | | | | | | | | | | | Driving Value to Dermatology Partners | | | | | | | | | | | | | | | | | | | | | | Safe Harbor Statement This presentation includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks, uncertainties and other factors. A ...

STRATA Skin Sciences, Inc. (NASDAQ:SSKN) Q2 2020 Earnings Conference Call August 11, 2020 8:30 AM ET Company Participants Monique Kosse – LifeSci Advisors Dolev Rafaeli – President and Chief Executive Officer Matt Hill – Chief Financial Officer Conference Call Participants Suraj Kalia – Oppenheimer Jeffrey Cohen – Ladenburg Thalmann Shawn Boyd – Next Mark Capital Operator Greetings, and welcome to STRATA Skin SciencesÂ' Second Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, thi ...

Financial Data and Key Metrics Changes - For Q1 2020, the company's revenue was $6.7 million, a decrease of 10.1% compared to $7.5 million in Q1 2019, primarily due to the impact of COVID-19 on the overseas capital equipment business [28] - Recurring revenues increased by 7.3% to $5.7 million from $5.3 million in Q1 2019, driven by an increase in patient flow to partner clinics [28] - Gross profit for Q1 2020 was $4.4 million, representing 65.4% of revenues, compared to $4.6 million or 61.6% of revenues in Q1 2019 [29] - The net loss for Q1 2020 was $1 million, or $0.3 per share, compared to a net loss of $1.3 million, or $0.04 per share, in Q1 2019 [31] Business Line Data and Key Metrics Changes - Equipment revenue for Q1 2020 was down 52.6%, amounting to $1 million compared to $2.2 million in Q1 2019 [28] - The company experienced a growth in recurring revenue margins by 2.2% despite losing momentum in the last three weeks of March [25] Market Data and Key Metrics Changes - Up to mid-March 2020, reimbursement requests were up 117% compared to the same period in 2019, but dropped to approximately 50% of the same period in 2019 from mid-March to the end of April [11] - The company has reached out to over 350 physician partners across 31 states as part of its patient outreach program [18] Company Strategy and Development Direction - The company is focused on executing its strategy and planning for a return to normal operations while managing through the COVID-19 pandemic [9] - STRATA is leveraging its unique recurring revenue business model and resources to support partner clinics in rebuilding patient referrals [17] - The company is conducting online clinical training and webinars to engage with physician partners [22] Management's Comments on Operating Environment and Future Outlook - Management expressed that the pandemic has created significant uncertainties, but they believe they have sufficient funding to navigate the next four quarters [24] - The company anticipates that as states begin to reopen, there will be a pent-up demand for treatments, and they are preparing to support clinics in managing this demand [56] Other Important Information - As of March 31, 2020, the company had $15.6 million in cash and cash equivalents, with an additional $2 million received from the Paycheck Protection Program [32] - The company has implemented cash preservation measures, including employee leave of absence and reduced discretionary spending, expected to save approximately $3 million per quarter [23] Q&A Session Summary Question: How is the company evaluating accounts and physician partners during the pandemic? - The company is in contact with clinics to assess their operational status and patient volume, allowing them to identify the right targets for re-engagement [39] Question: Has there been increased interest from physicians based on AAD guidelines? - The company has seen significant participation in clinical webinars and communication from physicians regarding the guidelines, indicating heightened interest [47] Question: How is the company leveraging patient volumes from previous quarters? - The company has developed a patient outreach program to re-engage patients who were in treatment prior to COVID-19, utilizing their resources to assist clinics [49] Question: What is the company's outlook on cash preservation and top-line performance? - The company has projected a runway of four quarters based on current cash reserves and anticipated business recovery, with a focus on managing expenses [81]

STRATA Skin Sciences, Inc. (NASDAQ:SSKN) Q4 2019 Earnings Conference Call March 17, 2020 8:00 AM ET Company Participants Matt Picciano - LifeSci Advisors Dolev Rafaeli - President & Chief Executive Officer Matt Hill - Chief Financial Officer Conference Call Participants Jeffrey Cohen - Ladenburg Thalmann Joe Pantginis - H.C. Wainwright Suraj Kalia - Oppenheimer Shawn Boyd - Next Mark Capital Operator Greetings, and welcome to the STRATA Skin Sciences Fourth Quarter and Fiscal Year 2019 Earnings Call. At thi ...

Summary of STRATA Skin Sciences, Inc. Conference Call Company Overview - **Company**: STRATA Skin Sciences, Inc. (NASDAQ: SSKN) - **Date of Call**: October 30, 2019 - **Participants**: - Matthew Picciano - IR, LifeSci Advisors - Dolev Rafaeli - Chief Executive Officer - Matthew Hill - Chief Financial Officer Key Points Financial Performance - STRATA reported year-end 2018 financial results and is finalizing Q1-Q3 2019 results [7][8] - Revenue growth observed since 2018, particularly in recurring revenues [8] - Gross margins improved, with expectations for continued expansion [11][12] - 2018 revenue was $29.9 million, slightly lower than previously disclosed [26] - Net loss for 2018 was $4 million, an improvement from a net loss of $21.5 million in 2017 [28] Strategic Initiatives - Focus on direct-to-consumer (DTC) advertising has shown positive results, with a 29% increase in patients treated year-to-date compared to 2018 [10][11] - STRATA has successfully executed a turnaround strategy since 2018, including a $17 million financing and management changes [9][12] - The company has replaced approximately 100 nonperforming accounts and increased its installed base of XTRAC systems from 746 at the end of 2018 to 784 by Q3 2019 [13][27] Market Opportunities - STRATA is targeting private equity-owned dermatology clinics, having doubled its presence in this segment [13][40] - The company is expanding internationally, particularly in South Korea and Japan, with a focus on recurring revenue models [14][16][44] - The South Korean market is seen as a significant opportunity due to national health insurance reimbursement for treatments [44] Competitive Landscape - STRATA faces limited competition in the domestic market, with only one other direct competitor experiencing challenges [12][41] - The company is positioned as a gold standard in several international markets, including South Korea and Japan [16][43] Technological Advancements - STRATA launched the new XTRAC S3 308 nanometer laser, which offers improved treatment efficiency and user experience [18] - The company received 510(k) clearance for a multi-micro dose for the excimer laser, expected to enhance treatment outcomes [17] Risks and Challenges - The company has faced challenges related to tariffs and the complexities of international market entry [14][56] - Ongoing accounting restatements have been a distraction but are now resolved, allowing the company to refocus on growth [54] Future Outlook - STRATA plans to continue investing in DTC advertising and expanding its sales and marketing efforts [29][30] - The company aims to leverage its established presence in the U.S. while exploring growth opportunities in international markets [56] Additional Insights - STRATA has a strong cash position of over $16 million as of September 30, 2019, despite costs associated with the restatement process [29] - The company has approximately 100 employees, with 45 in field sales roles [50][51] - The total share count is approximately 32.9 million common shares outstanding [48] This summary encapsulates the key points discussed during the STRATA Skin Sciences conference call, highlighting the company's financial performance, strategic initiatives, market opportunities, competitive landscape, technological advancements, risks, and future outlook.